Features

Because managers hold a status in society similar to that of doctors and lawyers, it is natural to think of business as a profession—and of business schools as professional schools. But, argues Barker, a professor at Cambridge University’s Judge Business School, that can lead to inappropriate analysis and misguided perceptions.

We turn to professionals for advice, he writes, because they have knowledge that we don’t. We trust their advice because they’ve been guaranteed by professional associations that establish the boundaries of the field and reach consensus on what body of learning is required for formal training and certification. These associations make a market for professional services feasible.

Although business schools might be able to reach consensus on what they should teach, the proper question is whether what they teach qualifies students to manage. After all, successful businesses are commonly run by people without MBAs. Managers’ roles are inherently general, variable, and indefinable; their core skill is to integrate across functional areas, groups of people, and circumstances.

Integration is learned in the minds of MBA students, whose experiences and careers are widely diverse, rather than taught in the content of program modules. Thus business education must be highly collaborative, with grading downplayed, and learning must differ according to the stage of a student’s career. Business schools are not professional schools. They are incubators for business leadership.

Spotlight

The realization of a strategy depends on countless employees. So it’s no surprise that when a strategy fails, the reason cited is usually poor execution.

But this view of strategy and execution relies on a false metaphor in which senior management is a choosing brain while those in the rest of the company are choiceless arms and legs that merely carry out the brain’s bidding. The approach does damage to the corporation because it alienates the people working for it.

A better metaphor for strategy is a white-water river, in which choices cascade from its source in the mountains (the corporation) to its mouth (the rest of the organization). Executives at the top make the broader choices involving long-term investments while empowering employees toward the bottom to make more concrete, day-to-day decisions that directly influence customer service and satisfaction.

For the cascade to flow properly, a choice maker upstream can set the context for those downstream by doing four things: explaining what the choice is and why it’s been made, clearly identifying the next downstream choice, offering help with making choices as needed, and committing to revisit and adjust the choice based on feedback.

When downstream choices are valued and feedback is encouraged, employees send information upward, improving the knowledge base of decision makers higher up and helping everyone in the organization make better choices.

Special teams dedicated to innovation initiatives inevitably run into conflict with the rest of the organization. The people responsible for ongoing operations view the innovators as undisciplined upstarts. The innovators dismiss the operations people as bureaucratic dinosaurs. It’s natural to separate the two warring groups. But it’s also dead wrong, say Tuck Business School’s Govindarajan and Trimble.

Nearly all innovation initiatives build on a firm’s existing resources and know-how. When a group is asked to innovate in isolation, the corporation forfeits its main advantage over smaller, nimbler rivals—its mammoth asset base. The best approach is to set up a partnership between the dedicated team and the people who maintain excellence in ongoing operations, the company’s performance engine. Such partnerships were key to the successful launch of new offerings by legal publisher Westlaw, Lucent Technologies, and WD-40.

There are three steps to making the partnership work: First, decide which tasks the performance engine can handle, assigning it only those that flow along the same path as ongoing operations. Next, assemble a dedicated team to carry out the rest, being careful to bring in outside perspectives and create new norms. Last, proactively manage conflicts. The key here is having an innovation leader who can collaborate well with the performance engine and a senior executive who supports the dedicated team, prioritizes the company’s long-term interests, and adjudicates contests for resources.

If you want to get anything done in a large corporation, you need power. And it won’t just fall into your lap: You have to go after it and learn how to use it. Many highly competent people get stuck because they’re uncomfortable with that reality.

Stanford University professor Pfeffer offers a primer on why power matters, how to get it, and how to use it to advance your organization’s agenda—thus, not incidentally, furthering your career.

When push comes to shove, the author explains, there are several things powerful people do to prevail. They mete out resources; deploy rewards and punishments to shape others’ behavior; advance on multiple fronts; make the first move; co-opt antagonists; remove rivals (nicely, if possible); avoid drawing unnecessary fire; use a personal touch; persist; attend to important relationships; and make their vision compelling.

Throughout, Pfeffer draws on real-world examples of people who exercised power skillfully to implement their plans—people ranging from the director of UCSF’s breast cancer center to a successful software executive to an Indian cricket mogul. And Pfeffer identifies three big barriers that can make you your own worst enemy unless you learn how to get over them and embrace the power you need.

After his guitar was broken on a United Air Lines flight and the airline rejected his damage claim, musician Dave Carroll made the YouTube video “United Breaks Guitars,” which more than 8 million people have viewed. Carroll is far from alone in having employed social media to lambaste a company for poor customer service. For example, one popular blogger advised her million-plus followers on Twitter not to buy Maytag appliances.

But the very technologies that empower customers can also empower employees, write Bernoff and Schadler, of Forrester Research. Companies can build a strategy around freeing employees to experiment with new technologies, make high-profile decisions on the fly, and effectively speak for the organization in public. Companies that feel hesitant to give their employees such freedom can benefit from what the authors call the HERO Compact—whereby management, IT, and HEROes (for “highly empowered and resourceful operatives”) agree to work together to manage technological innovations. Management contracts to encourage innovation and manage risk, IT to support and scale employees’ projects, and HEROes to innovate within a safe framework.

Best Buy, Black & Decker, Vail Resorts, and Aflac are among the companies that have empowered their employees to take full advantage of social media. But it takes a while for corporate cultures to embrace this sort of innovation. In the meantime, managers can move forward on their own—building internal communities, looking outside the company for creative strategies, reviewing their hiring practices, and reaching out to customer-facing departments.

Executing a new strategy nearly always requires new resources and capabilities—and most firms seek them out the wrong way.

In a 10-year study of 162 telecom companies, the authors found that organizations deploying all the methods available to them outperform those that stick with a narrow approach. Yet most firms doggedly pursue one chief method, whether it’s developing what they’ve already got internally, entering into contracts with providers, forming partnerships, or using M&A. The framework in this article will help companies weigh their options more strategically.

To select the best tactics for the situation you face, ask whether your existing resources are relevant to your new needs. If the answer is yes, internal development makes sense; otherwise, you’ll need to go outside the firm. Next, to figure out what kind of relationship you should pursue with a provider, determine whether all parties would have a shared understanding of the resources’ value. If so, a purchase contract is a sensible choice; if not, consider a partnership or a corporate acquisition. Because M&A is the most complex option, reserve it for cases in which it really pays to have a deep relationship with the resource provider.

Features

Two years ago Starbucks ran into trouble, and Schultz was called on to serve a second time as its CEO. In this edited interview, he talks about the effects of the financial crisis on Starbucks’s sales, the surge of competition, the blogosphere, and retaining authenticity in spite of growth. Schultz calls values, culture, and Starbucks’s reservoir of trust with its employees “the only assets we have as a company.” He saw preserving and enhancing the integrity of those assets as his primary challenge. That meant declining to franchise the system or compromise on quality or change the company’s generous health care coverage.

One bold move was to take 10,000 store managers to New Orleans for a conference that began with more than 50,000 hours of community service and an investment in local projects of $1 million. The purpose of the conference was to galvanize the entire leadership of the company and to stress personal accountability and responsibility. Schultz believes that without that experience, he couldn’t have turned things around for Starbucks.

The notion that companies must go above and beyond in their customer service activities is so entrenched that managers rarely examine it. But a study of more than 75,000 people interacting with contact-center representatives or using self-service channels found that over-the-top efforts make little difference: All customers really want is a simple, quick solution to their problem.

The Corporate Executive Board’s Dixon and colleagues describe five loyalty-building tactics that every company should adopt: Reduce the need for repeat calls by anticipating and dealing with related downstream issues; arm reps to address the emotional side of customer interactions; minimize the need for customers to switch service channels; elicit and use feedback from disgruntled or struggling customers; and focus on problem solving, not speed.

The authors also introduce the Customer Effort Score and show that it is a better predictor of loyalty than customer satisfaction measures or the Net Promoter Score. And they make available to readers a related diagnostic tool, the Customer Effort Audit. They conclude that we are reaching a tipping point that may presage the end of the telephone as the main channel for service interactions—and that managers therefore have an opportunity to rebuild their service organizations and put reducing customer effort firmly at the core, where it belongs.

Virtually all managers in consumer businesses recognize major social, economic, and technological trends. But many do not consider the profound ways in which trends—especially those that seem unrelated to their core markets—influence consumers’ aspirations, attitudes, and behaviors. As a result, companies may be ceding to rivals an opportunity to transform the industry.

For instance, the impact of the digital revolution on consumers’ daily lives is hardly a revelation. But it may be less obvious that heavy digital users tend to focus on short-term goals, demand immediate gratification, and expect to multitask. That insight, the authors argue, is as important for a company that sells lipstick as it is for one that sells smartphones.

The authors present a process for identifying the trends that could reshape a business and three strategies for leveraging trends to create new value propositions:

Infuse aspects of the trend into the product category to augment traditional offerings, as Coach did with its lower-priced Poppy handbags.

Combine aspects of the trend with attributes of the category to produce offerings that transcend it, as Nike did with its Nike+ sports kit and web service.

Or counteract negative effects of the trend with new products and services that reaffirm the category’s values, as iToys did with its ME2 video game, which encourages children to be physically active.

Affordability and sustainability, not premium pricing and abundance, are the new tenets of effective innovation. Westerners are struggling with the shift in mind-set, but a few emerging-market pioneers are showing the way: They’re designing inexpensive products and manufacturing them with so little capital and on a scale so vast that their prices—1 cent for a one-minute telephone call, $2,000 for a car—are the lowest in the world.

Nowhere is this approach, which the authors call “Gandhian innovation,” more evident than in India. Smart companies have used it to penetrate the country’s burgeoning mass market. This article provides a framework to help executives understand three types of Gandhian innovation that have brought corporations success: disrupting business models, as Bharti Airtel did when it shifted its focus from average revenue per user to gross profit and expanded its market reach; modifying existing business capabilities, as Computational Research Laboratories did when it came up with a whole new supercomputer design that used standard components; and creating or sourcing new capabilities, as Lupin did when it reversed the usual drug development process to create an affordable treatment for psoriasis.

Singapore Airlines is widely regarded as an exemplar of excellence in an industry whose service standards are tumbling. What’s not so well known is that the company is also one of the civil aviation industry’s cost leaders. SIA’s success in executing a dual strategy of differentiation and cost leadership is unusual. Indeed, management experts, such as Michael Porter, argue that it’s impossible to do so for a sustained period since dual strategies entail contradictory investments and organizational processes. Yet SIA, and a few other emerging-economy companies, view the dualities as opposites that form part of a whole.

SIA executes its dual strategy by managing four paradoxes: Achieving service excellence cost-effectively, fostering centralized and decentralized innovation, being a technology leader and follower, and using standardization to achieve personalization. The results speak for themselves: SIA has delivered healthy financial returns; it has never had an annual loss; and except for the initial capitalization, the Asian airline has funded its growth itself while paying dividends every year.

In 2004 the biggest problem the online shoe retailer Zappos faced was how to staff its customer call center with dedicated, high-caliber service reps. The company’s headquarters were in San Francisco, where the high cost of living—and the upwardly mobile Silicon Valley mentality—deterred people from making customer service a career. Although it is an internet company, Zappos finds that most customers telephone at least once at some point. Its philosophy is to view every one of the thousands of phone calls and e-mails it receives daily as an opportunity to build the very best customer service into the brand.

To do that, Zappos would need to find call center reps elsewhere. But the outsourcing possibilities were disappointing, and the company’s previous experience with using vendors for warehousing and shipping had been poor. Hsieh and his team realized that customer service should permeate the whole company, not just one department. So they decided to move their headquarters to Las Vegas, a 24/7 city where employees are used to working late hours and the economy is focused on hospitality. Surprisingly, more than 75% of the staff was willing to relocate, and the company culture became even stronger as a result of the move.

Although Amazon now owns Zappos—which has expanded into clothing, housewares, cosmetics, and other items—Hsieh’s customer service still strives to make a personal connection with shoppers. He calls the Zappos reps the best in the world.

Harvard Business School’s Christensen teaches aspiring MBAs how to apply management and innovation theories to build stronger companies. But he also believes that these models can help people lead better lives. In this article, he explains how, exploring questions everyone needs to ask: How can I be happy in my career? How can I be sure that my relationship with my family is an enduring source of happiness? And how can I live my life with integrity?

The answer to the first question comes from Frederick Herzberg’s assertion that the most powerful motivator isn’t money; it’s the opportunity to learn, grow in responsibilities, contribute, and be recognized. That’s why management, if practiced well, can be the noblest of occupations; no others offer as many ways to help people find those opportunities. It isn’t about buying, selling, and investing in companies, as many think.

The principles of resource allocation can help people attain happiness at home. If not managed masterfully, what emerges from a firm’s resource allocation process can be very different from the strategy management intended to follow. That’s true in life too: If you’re not guided by a clear sense of purpose, you’re likely to fritter away your time and energy on obtaining the most tangible, short-term signs of achievement, not what’s really important to you.

And just as a focus on marginal costs can cause bad corporate decisions, it can lead people astray. The marginal cost of doing something wrong “just this once” always seems alluringly low. You don’t see the end result to which that path leads. The key is to define what you stand for and draw the line in a safe place.

Experience

Executives stay with an organization for only 3.3 years, on average. But does switching employers offer a fast-track to the top jobs? Research suggests the answer is no. In fact, that’s one of four career fallacies identified in a study examining how managers get ahead.

Fallacy 1: Job hoppers prosper. An analysis of the career histories of 1,001 CEOs and 14,000 non-CEOs in top corporations shows that the more years executives stay with the company, the faster they make it to the top. Lesson: Build a résumé that demonstrates a balance between external and internal moves.

Fallacy 2: A move should be a move up. Among the executives studied, about 40% of job changes were promotions, 40% were lateral, and 20% were demotions. Lesson: While a downward move will detract from your CV, a lateral move can often lead to a promotion or enhance your CV when the new company conveys brand value.

Fallacy 3: Big fish swim in big ponds. When making a move, 64% of executives trade down to smaller, less-recognized firms. They gain better titles or positions, cashing in on the brand value of their former employer. Lesson: Join top companies as early in your career as you can, and transfer to a lesser company only if the job is very attractive.

Fallacy 4: Career and industry switchers are penalized. It’s not always a bad move to change industries, or even careers, as is often assumed. Firms hire employees from different businesses for many reasons: For example, another industry might simply offer superior human capital. Lesson: Look for industries where your skills represent a genuine asset.

Every career is unique; what’s important is to look at each move with a critical eye.